Real estate and aerospace: ripe for disruption?

14 November 2018

The aerospace industry in North America is adjusting to new entrants and technological innovation, but its physical real estate is lagging behind. To remain competitive in this changing market, aerospace real estate teams must learn from global best practice to match the pace of change.

Nic Horn, Hi tech and manufacturing lead, Americas

Neil Bullen, Global head of real estate

Ten years after the global financial crisis, the aerospace industry has reinvented itself. Funding pressures and customer demand have driven leaner, more productive manufacturing methods. At the same time, Silicon Valley and other tech disruptors are challenging established brands to accelerate product development and delivery.

The real estate model, however, is struggling to keep pace with these commercial pressures. To remain competitive, aerospace manufacturers need to disrupt their delivery model – taking lessons from other industries to ensure they are accelerating, not hindering, their commercial objectives.

Real estate as a strategic function

In other sectors, the role of the real estate team has progressed from performing a necessary function – delivering physical space – to a critical business function, driving better business performance by rethinking the value, function and requirement for built assets.

For example, in financial services, more flexible working models and investment in personal IT connectivity have both reduced expenditure on redundant physical space, and improved employee productivity.

In pharmaceuticals, firms are co-locating research and development teams in flexible facilities and research hubs to promote scientific collaboration and increase responsiveness to consumer demands.

Aerospace real estate teams can achieve the same shift by focusing on the strategic function and contribution of their assets, including a more sophisticated whole-life view, to contribute to business growth.

A vertically-integrated model

Part of this shift includes moving from a traditional real estate supply chain delivery model towards one of closer vertical integration – where real estate teams act increasingly as commissioners of specialist services to deliver state-of-the-art assets.

Other industries, especially large corporates, have seen this shift toward smarter procurement – building deeper partnerships with strategic suppliers and increasingly moving towards the delivery and management of assets as a managed service.

Doing so has allowed real estate teams to shift focus from day-to-day operations to the big priorities for the wider business: from security over the manufacture of high intellectual property components, to keeping pace with fluctuations in customer demand. Critically for global businesses, this approach can also support greater consistency in delivery across multiple markets.

This model of procurement should be familiar ground to aerospace players, which have honed a manufacturing model whereby components are regularly sourced from multiple suppliers to a common specification. Real estate functions now need to catch up.

Thinking long term

Despite being subject to continually fluctuating customer demand and changing technological advancements, aerospace has remained reliant on a cyclical construction model, responding to immediate need instead of pre-empting future requirements. To increase competitiveness, real estate teams need an approach where flexibility is built-in to the design and initial construction process, enabling for the fast reconfiguration or upgrading of facilities as the needs of the business evolve – while keeping costs under control.

This approach is standard practice for long-term players in the oil and gas sector, where initial build phase requirements are considered only one part of a decades-long program, designed to accommodate fluctuations in production in response to commodity prices and customer demand. This is supported by an increasing use of ‘digital twins’ of physical assets – models that allow commissioning teams to run scenarios on the future performance of their assets as the needs of the business shift.

A data and digital-led approach

Of course, these benefits are easier to realise at the early stages of a project, rather than retrofitting physical or digital solutions once an asset is already in operation. This is one of the clear edges new entrants have over legacy manufacturers.

Getting the most out of digital innovation relies on establishing a data-led approach. In real estate, internet of things technology holds the potential to track building usage and performance, which enables teams to obtain near real-time performance and make informed and objective decisions around the shape and efficiency of a physical portfolio.

To deliver these benefits, aerospace businesses need to demand greater innovation from their real estate partners. Whereas the use of models with 3D, 4D, 5D and 6D data, structured data and component-led design have become intrinsic to aerospace innovation and manufacture, the limited use of these tools within construction and real estate has a major impact on the delivery and asset life of new facilities.

Disrupting the real estate operating model

Harnessing data is essential to aligning the role of real estate with the wider aerospace enterprise, moving the function from being a technical ‘owner’ to a strategic commissioner of services with a programmatic – not project – approach.

Achieving this shift will require significant organizational change, putting in place new structures and skillsets. In a competitive market, the onus is on real estate functions and aerospace manufacturers to actively promote this disruption, or risk losing market share to more agile competitors.